Pay it Forward: School Fee Financing Options

A quality education is considered the best investment parents can make in their children’s future. But, like any investment, it requires forethought and a considerable capital outlay to achieve high returns.

The good news is that there are a number of strategies parents can use to reduce the financial burden of school fees.

For disciplined money managers with sufficient cash flow, paying school fees upfront will usually attract a discount.

For the rest of us, it pays to think ahead and save up. Education savings funds and investment bonds are two common methods of saving for school fees.

Education savings fundsThese specially-designed education savings plans are structured to help families meet savings targets over a period of time. They can offer tax incentives but are subject to withdrawal conditions that may not suit all investors. The two main providers of these types of funds in Australia are Australian Scholarships Group and Australian Unity via its Education Savings Fund.

Investment bondsSimilar to a managed fund, ASIC says investment bonds are designed to be held for at least 10 years and can be a tax-effective way to save for a child’s future “if certain rules for making contributions and withdrawals are followed.” Also known as insurance bonds, they are widely available through insurers and friendly societies.

LoansSchool Fee Finance and EdStart are new entries into the education financing market. Both companies provide “competitive rate” loans with long-term repayment plans to help parents pay for private school fees.

For detailed information on these and other financial products, visit ASIC’s MoneySmart website and be sure to heed its advice: “If you need help with a financial plan to save for your children’s education, or if you need more information about education funds, consider getting financial advice from a qualified financial adviser.”